Smart Buying
Back in Balance
How to get the best deal when you buy and the best price when you sell.
By Pat Mertz Esswein, Associate Editor
From Kiplinger's Personal Finance magazine, March 2006
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Stay flexible. A more balanced market means you'll probably be negotiating with the buyers. That was true for the Olivers in Las Vegas, who went back and forth on the terms a couple of times. Finally, the buyers offered $317,000 but said they wanted the appliances. The Olivers didn't want to give up their washer and dryer, but for $1,000 more they were willing to leave the fridge.
Also, don't judge an offer on price alone because other factors may make it worthwhile. For example, an offer from buyers who will rent back the house to you until you're ready to move might be worth a lot. Or maybe you've found a buyer who can easily qualify for a mortgage at your price but will have difficulty coming up with the down payment or closing costs. In that case, a seller contribution in exchange for a higher price might make sense.
Make it stand out. At a minimum, make repairs, clean your house and get rid of clutter. To compete with new homes in their area, the Olivers landscaped their backyard and put in a sprinkler system. They cleaned the house thoroughly and had it staged to look more like a model home. To make the master bedroom look bigger, they put in a smaller bed and dressed it with a new comforter and linens to give it a sophisticated look. The couple even stayed with Crystal's mother for the duration, because Crystal was working the graveyard shift and they didn't want to put off any prospective buyers.
You'll also give buyers peace of mind if you're willing to share the cost of a current appraisal and any appropriate inspections, such as for termites.
Buyers: Don't wait
Is now a good time to buy? Re/Max's chairman, Dave Liniger, gave his four children some advice when they asked if they should buy or wait:"In every case, I advised that it's impossible to time the market -- no one can say accurately what will happen." He recommends that buyers go ahead and buy something they want to stay in for at least the next five to ten years."If prices go down, you're not hurt -- you're in the house you want to live in."
That was the goal of Jeff Organ and his wife, Danielle Guildner: a home where they could have a yard, a dog and a family. Their two-bedroom condo in Carlsbad, Cal., didn't fit the bill -- and they didn't want to stay in California. They did some Internet research, then went to visit a friend in Austin, Tex., a city they found to be young, artsy and friendly."Strangers say ÔHi!' to you," says Organ."It's a different mentality." The couple set out on a tour with a real estate agent, who showed them spacious new homes that they could afford. They put down $8,000 on a house that cost $211,000 for 2,700 square feet, four bedrooms, 2.5 baths and a yard. Although they negotiated a bit on $30,000 worth of upgrades, they basically paid the asking price."The builder wasn't in a negotiating mood," says Organ, 30. And besides, he notes, it was half of what they would have had to spend in California.
Housing demand in Austin is rising with the recovery of the tech industry, and the city is attracting baby-boomers looking for affordable places to retire. In late 2005, the median home price was $170,000, up 15% from 2004. But price hikes have been subdued because builders are busy constructing new homes. That's one reason Guildner, 27, found it easy to transfer her job in new-construction lending with Wells Fargo Home Mortgage to Texas. Organ, a teacher, is still job hunting but expects to find plenty of openings. Except for the weather, he can't think of anything he'll miss about California.
Even in cities where prices have cooled, it's not totally a buyer's market -- just less of a seller's market. Competition for homes in some cities remains brisk. Short of moving to a lower-cost state, you're more likely to find a bargain if you're willing to make small compromises. In Las Vegas, for example, Eileen Engel says buyers who want a new property, especially one with a view or on the Strip, can expect to pay top dollar. But if you're willing to buy an existing home, you'll find more reasonable prices, especially on properties that are owned by investors eager to sell.
Target your offer. Start by finding out how motivated the sellers are, then target your offering price. Roberta Murphy, the San Diego agent, tells buyers that if a home is new to the market and priced very well, they should make an offer at the top of the range; if it has been on the market for six months, they might make an offer at the bottom of the range or even below.
Many builders have begun to offer concessions and upgrades as their new-home inventories grow fatter. If those aren't advertised, negotiate for them. You may find bargains on resale homes in developments where builders are still selling new properties. The owner of one slightly used property may have more freedom to reduce the price than the builder who has already sold 200 at the higher price.
Win the beauty contest. You may still find stiff competition for properties with the greatest discounts, so you'll want to look like a sure thing to sellers. Get preapproval for your financing and try to schedule any appraisals and inspections in advance to minimize the time those will take. You can even write a"love letter" to the seller, pleading your case."By putting a personal story to the offer, you stand out," says Murphy.
Protect yourself. In some of the hottest markets during the past few years, buyers have felt compelled to make "clean" offers. As sanity returns, get price and property protection by adding to the contract contingencies for a current appraisal, financing and a home inspection.